- (1.)The petitioner resides and owns buildings within the limits of the Municipality of Ernakulam and derives income with respect to them by way of rent. She was being assessed to tax in respect of such income, formerly under S.86(1)(b) of the Cochin Municipal Act, 18 of 1113, and latterly, under the corresponding S.110(1)(b) of the Kerala Municipalities Act, 1960. When demands were made for payment of such tax for the half years of 1962-63, she filed this petition under Art.226 of the Constitution, challenging the constitutionality of S.110(1)(b) so far as it relates to "income from investment." This section so far as it is relevant is as follows:-
"(1) If the council by a resolution determines that a profession tax shall be levied-

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(b) resides in the municipality for not less than sixty days in the aggregate and is in receipt of any pension or income from investments, shall pay a half yearly tax assessed in accordance with the rules in Schedule 2."

Income by way of rent with respect to buildings is being taxed as income from investments. The Supreme Court" observed in C. Rajagopalachari v. The Corporation of Madras AIR 1964 SC 1172 at p. 1178, a case which related to receipt from pension under the corresponding provision in the Madras City Municipal Act, that "the tax on the receipt of pension or on the income from investments which is referred to in the last part of S.111(1) is in truth and substance a tax on income." The arguments before me, proceeded on the basis of this observation of the Supreme Court. Relying on it, it was contended for the petitioner, that the State had no power to legislate with respect to income from investments as by S.110(1)(b) of the Kerala Act, because such legislative power is exclusively with Parliament under entry 82, in list I, in schedule 7 of the Constitution. Learned Government Pleader appearing for the State, supported the validity of the tax by relying on Art.277 of the Constitution.

(2.)Art.277 may be extracted for ready reference:
"Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district or other local area may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law."

For the Article to apply, it is immaterial that the tax is one mentioned in the Union List, and that the State Legislature has no plenary power to legislate with respect to it; but the levy would be justified only till provision to the contrary is made by Parliament by law. It was contended for the petitioner, that such a provision was made when Parliament enacted S.13(1) of the Finance Act, 1950. The relevant part of that Section is in these terms:-

"If immediately before the 1st day of April, 1950, there is in force in any Part B State ... any law relating to income tax or super tax or tax on profits of business, that law shall cease to have effect ..."

There were in the former State of Cochin, the Cochin Income Tax Act, (Act 8 of 1108) and Excess Profits Tax Act (Act 2 of 1117). Certainly, these are "laws relating to income tax or super tax or tax on profits of business" and they ceased to have effect from the 1st April, 1950. The argument was, that because "income from investments" is income which is liable to income tax, so much of S.86(1)(b) of the Cochin Municipal Act which was in force at the time as relates to income from investments, must be held to be a law relating to income tax within the meaning of S.13(1) aforesaid. I am of the opinion, that it cannot be. The Income Tax Acts were enacted, as the preamble to one of them shows, "to consolidate and amend the law relating to income tax and supertax" while the Municipal Acts were enacted, as the preamble to the Cochin Municipal Act shows, "to consolidate and amend the law relating to Municipalities in Cochin," or as the preamble to the Kerala Act shows, "to consolidate and amend the law relating to Municipal administration." Prima facie, the Cochin Municipal Act is not a law relating to income tax or super tax or tax on profits of business. For carrying on Municipal administration, taxes may have been imposed and some of them may partake of the characteristics of tax on income. For that reason alone, it is difficult to hold that the Act or S.86(1)(b) in it, is a law relating to income tax. Before the Finance Act of 1950, tax on income by way of rent was chargeable under the Cochin Income Tax Act and also under S.86(1)(b) of the Cochin Municipal Act. After the Finance Act of 1950 also, this continued to be the position, except that the former was chargeable under the Indian Income Tax Act and not the Cochin Act. The object underlying Art.277 has been stated thus by the Supreme Court in Amraoti Municipality v. Ramchandra AIR 1964 SC 1166 :

"If, as is admitted, the sole object sought to be achieved by this provision for 'continuance' is to avoid dislocation of the finances of the State and local authorities, by depriving them of the revenues which they were deriving at the commencement of the Constitution, it would mean that the intention was to permit the existing range of the taxes to be continued."

(3.)Learned Government Pleader invited my attention to the doctrine of pith and substance, which is often applied in determining questions of legislative competency to make enactments. That doctrine is too well settled to require any restatement by me at this time of the day. Though it has no direct application here, it is helpful perhaps to determine, whether the Cochin Municipal Act can be deemed to be a law relating to income tax and supertax. The pith and substance of that Act is not taxation, but Municipal administration. I also find it difficult to accept the argument, that at least S.86(1)(b) of the Cochin Municipal Act must to the extent it relates to income from investments, be held to be a law relating to income tax or super tax within the meaning of S.13(1) of the Finance Act, 1950 merely because the Supreme Court has held that it is a tax on income.